MAMEWorld Forums - The Loony Bin - Re: Hey Kick, can you let me have $50,000?

I would be careful putting too much weight into gold/silver.

http://online.wsj.com/article/SB10001424052748703399204576108463818702014.html

The 1920s rules that were enacted to protect people from cornering the market with very little in funds was never put back into place.

Quite literally these guys are buying 100 dollars worth of stuff with 1-10 bucks. This in itself creates a large demand that is not really there bumping up the price.

That housing bubble and .com money did not just disappear (and they didnt have much skin in the game in the first place). It went into different 'safe' markets. The gov did this to enable 'faster cheaper loans' to enable 'everyone to own a home'. The traders then went overboard with it (just as they did in the 20s). The idea was 'risky loans' balanced by 'safe commodity bets'.

Now on the other side of the coin. The fed is printing money. LOTS of money. That is inflationary. You will see it in other commodities pretty soon if not already. But also keep in mind these dudes are gaming the commodity market. So it is hard to tell what the real effect of all this extra cash will be as it is being amplified by the traders.

I skimmed the first 20 or so pages. Talk about inflation. Whoa... Your analysis is about spot on. The thing most people do not realize is money has no value. It is what I can get with that money that has value. Create more of it does have many implications though.

Best example is buying a house. Over time the price goes up and down. But lets say I sell my house today. I take the money and do what with it? Buy another house (need a place to live and all). I am going to end up with about the same amount of house (if I stay in the area). No matter how much money I make or lose on it.

Now the people who loaned me the money to buy the house are *VERY* interested in inflation. They are very interested because they have loaned me effectively cash. As inflation erodes the value of their loan (the main reason they charge me an interest rate). If the interest rate is not high enough the bank 'gets the shaft' as it were. It is why they charge way more than what inflation is. Now if inflation is higher than your interest rate you would see many banks hyperventilating. Deflation just flips it around and you end up 'getting the shaft' on a loan. It is why the US gov is very careful to make sure there is some sort of inflation (they have huge loans). It is also why you see the Fed keeping tight reign on interest rates (as they are bankers and do not want it going up too fast). I will leave it as an exercise why the banks do not want deflation (hint they own part of your house).